Question 1

The most important fundamental component of an entity's internal control is

Accepted Answer

A)  Effectiveness and efficiency of operations. 
B)  People who operate the control system. 
C)  Reliability of financial reporting. 
D)  Compliance with applicable laws and regulations. 
A)  Effectiveness and efficiency of operations. 
B)  People who operate the control system. 
C)  Reliability of financial reporting. 
D)  Compliance with applicable laws and regulations. B

Question 2

After obtaining an understanding of internal controls and assessing control risk on the audit of a nonpublic company,an auditor decided to perform tests of controls.The auditor most likely decided that

Accepted Answer

A)  It would be efficient to perform tests of controls that would result in a reduction in planned substantive tests. 
B)  Additional evidence to support a further reduction in control risk is not available. 
C)  An increase in the assessed level of control risk is justified for certain financial statement assertions. 
D)  There were many internal control weaknesses that could allow errors to enter the accounting system. 
A)  It would be efficient to perform tests of controls that would result in a reduction in planned substantive tests. 
B)  Additional evidence to support a further reduction in control risk is not available. 
C)  An increase in the assessed level of control risk is justified for certain financial statement assertions. 
D)  There were many internal control weaknesses that could allow errors to enter the accounting system. A

Question 3

Which of the following statements is not true with respect to the auditors' report on internal control over financial reporting?

Accepted Answer

A)  The report will be dated as of the date of the financial statements. 
B)  The report will express an opinion on the effectiveness of internal control over financial reporting. 
C)  The auditor will issue an adverse opinion if one or more material weaknesses exist. 
D)  The report may be presented with the report on the entity's financial statements as a combined report. 
A)  The report will be dated as of the date of the financial statements. 
B)  The report will express an opinion on the effectiveness of internal control over financial reporting. 
C)  The auditor will issue an adverse opinion if one or more material weaknesses exist. 
D)  The report may be presented with the report on the entity's financial statements as a combined report. A

Question 4

Identify and explain briefly the phases of an internal control evaluation.

Accepted Answer

Phase 1,Understanding and documenting th

Question 5

Which of the following is a step in an auditor's decision to assess control risk at below the maximum?

Accepted Answer

A)  Apply analytical procedures to both financial data and nonfinancial information to detect conditions that may indicate weak controls. 
B)  Perform tests of details of transactions and account balances to identify potential errors and fraud. 
C)  Identify specific internal control policies and activities that are likely to detect or prevent material misstatements. 
D)  Document the fact that the additional audit effort to perform tests of controls exceeds the potential reduction in substantive testing. 
A)  Apply analytical procedures to both financial data and nonfinancial information to detect conditions that may indicate weak controls. 
B)  Perform tests of details of transactions and account balances to identify potential errors and fraud. 
C)  Identify specific internal control policies and activities that are likely to detect or prevent material misstatements. 
D)  Document the fact that the additional audit effort to perform tests of controls exceeds the potential reduction in substantive testing.

Question 6

Auditors do not need to perform tests of controls on internal control activities that are evaluated as weak just to prove the weaknesses actually exist.

Accepted Answer

A) True 
 B)False

Question 7

A salesclerk enters a customer's six-number customer account.The computer program uses the first five numbers to calculate a sixth number.This resulting number is then compared to the sixth number entered by the sales clerk.This is an example of a

Accepted Answer

A)  Valid character test. 
B)  Missing data test. 
C)  Reasonableness test. 
D)  Check digit. 
A)  Valid character test. 
B)  Missing data test. 
C)  Reasonableness test. 
D)  Check digit.

Question 8

Auditors perform tests of control activities to determine how the company's controls actually functioned during the period under audit.

Accepted Answer

A) True 
 B)False

Question 9

After obtaining an understanding of a client's financial reporting control activities,the auditor would next

Accepted Answer

A)  Test the client's control activities. 
B)  Assess the final control risk. 
C)  Document the understanding obtained. 
D)  Plan the remainder of the audit work. 
A)  Test the client's control activities. 
B)  Assess the final control risk. 
C)  Document the understanding obtained. 
D)  Plan the remainder of the audit work.

Question 10

Auditors can stop the assessment of control risk for nonpublic entities for either effectiveness or efficiency reasons.

Accepted Answer

A) True 
 B)False

Question 11

A material weakness results in a ________________________________ that a ___________________________________ would not be prevented or detected on a timely basis.

Accepted Answer

reasonable

Question 12

Which of the following audit procedures most likely would provide an auditor the most assurance about the effectiveness of the operation of an entity's internal control?

Accepted Answer

A)  Confirmation with outside parties. 
B)  Inquiry of client personnel. 
C)  Successful reperformance of the control activity. 
D)  Observation of client personnel. 
A)  Confirmation with outside parties. 
B)  Inquiry of client personnel. 
C)  Successful reperformance of the control activity. 
D)  Observation of client personnel.

Question 13

Control systems generally provide absolute assurance that the objectives of internal control are satisfied.

Accepted Answer

A) True 
 B)False

Question 14

The five internal control components do not include

Accepted Answer

A)  Control activities. 
B)  Risk assessment. 
C)  Monitoring. 
D)  Control risk. 
A)  Control activities. 
B)  Risk assessment. 
C)  Monitoring. 
D)  Control risk.

Question 15

__________________________ are the set of policies and procedures that are designed to ensure that transactions are recorded properly.

Accepted Answer

The answer of __________________________ are the set of policies and...

Question 16

The most important feature of an internal control system is the people who make the system work.

Accepted Answer

A) True 
 B)False

Question 17

The primary reason for evaluating a company's internal control is to provide a basis for communicating significant deficiencies.

Accepted Answer

A) True 
 B)False

Question 18

Discuss what constitutes a material weakness in internal control.

Accepted Answer

A material weakness in internal control

Question 19

When obtaining an understanding of an entity's internal control in a financial statement audit of a nonpublic company,an auditor is not obligated to

Accepted Answer

A)  Determine whether control activities have been placed in operation. 
B)  Perform procedures to understand the design of the internal control system. 
C)  Document the understanding of the company's internal control system. 
D)  Search for significant deficiencies in the operation of the internal control system. 
A)  Determine whether control activities have been placed in operation. 
B)  Perform procedures to understand the design of the internal control system. 
C)  Document the understanding of the company's internal control system. 
D)  Search for significant deficiencies in the operation of the internal control system.

Question 20

Auditors should begin their evaluation of internal controls over financial reporting on a bottom-up basis,starting with the account level assertion and working up to entity-level controls.

Accepted Answer

A) True 
 B)False

The most important fundamental component of an entity's internal control is

After obtaining an understanding of internal controls and assessing control risk on the audit of a nonpublic company,an auditor decided to perform tests of controls.The auditor most likely decided that

Which of the following statements is not true with respect to the auditors' report on internal control over financial reporting?

Identify and explain briefly the phases of an internal control evaluation.

Which of the following is a step in an auditor's decision to assess control risk at below the maximum?

Auditors do not need to perform tests of controls on internal control activities that are evaluated as weak just to prove the weaknesses actually exist.

A salesclerk enters a customer's six-number customer account.The computer program uses the first five numbers to calculate a sixth number.This resulting number is then compared to the sixth number entered by the sales clerk.This is an example of a

Auditors perform tests of control activities to determine how the company's controls actually functioned during the period under audit.

After obtaining an understanding of a client's financial reporting control activities,the auditor would next

Auditors can stop the assessment of control risk for nonpublic entities for either effectiveness or efficiency reasons.

A material weakness results in a that a ___ would not be prevented or detected on a timely basis.

Which of the following audit procedures most likely would provide an auditor the most assurance about the effectiveness of the operation of an entity's internal control?

Control systems generally provide absolute assurance that the objectives of internal control are satisfied.

The five internal control components do not include

__________________________ are the set of policies and procedures that are designed to ensure that transactions are recorded properly.

The most important feature of an internal control system is the people who make the system work.

The primary reason for evaluating a company's internal control is to provide a basis for communicating significant deficiencies.

Discuss what constitutes a material weakness in internal control.

When obtaining an understanding of an entity's internal control in a financial statement audit of a nonpublic company,an auditor is not obligated to

Auditors should begin their evaluation of internal controls over financial reporting on a bottom-up basis,starting with the account level assertion and working up to entity-level controls.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

Exam 5: Risk Assessment: Internal Control Evaluation

The most important fundamental component of an entity's internal control is

After obtaining an understanding of internal controls and assessing control risk on the audit of a nonpublic company,an auditor decided to perform tests of controls.The auditor most likely decided that

Which of the following statements is not true with respect to the auditors' report on internal control over financial reporting?

Identify and explain briefly the phases of an internal control evaluation.

Which of the following is a step in an auditor's decision to assess control risk at below the maximum?

Auditors do not need to perform tests of controls on internal control activities that are evaluated as weak just to prove the weaknesses actually exist.

A salesclerk enters a customer's six-number customer account.The computer program uses the first five numbers to calculate a sixth number.This resulting number is then compared to the sixth number entered by the sales clerk.This is an example of a

Auditors perform tests of control activities to determine how the company's controls actually functioned during the period under audit.

After obtaining an understanding of a client's financial reporting control activities,the auditor would next

Auditors can stop the assessment of control risk for nonpublic entities for either effectiveness or efficiency reasons.

A material weakness results in a ________________________________ that a ___________________________________ would not be prevented or detected on a timely basis.

Which of the following audit procedures most likely would provide an auditor the most assurance about the effectiveness of the operation of an entity's internal control?

Control systems generally provide absolute assurance that the objectives of internal control are satisfied.

The five internal control components do not include

__________________________ are the set of policies and procedures that are designed to ensure that transactions are recorded properly.

The most important feature of an internal control system is the people who make the system work.

The primary reason for evaluating a company's internal control is to provide a basis for communicating significant deficiencies.

Discuss what constitutes a material weakness in internal control.

When obtaining an understanding of an entity's internal control in a financial statement audit of a nonpublic company,an auditor is not obligated to

Auditors should begin their evaluation of internal controls over financial reporting on a bottom-up basis,starting with the account level assertion and working up to entity-level controls.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

A material weakness results in a that a ___ would not be prevented or detected on a timely basis.